The decade of the 1940s saw the Japanese Imperial Army sweep through the region, inflicting humiliating defeats on the colonial powers in Burma and British Malaya, and in the Philippines and the Netherlands Indies. Although the Japanese were initially greeted as liberators in some parts of Southeast Asia, disillusion rapidly set in as food supplies were requisitioned and local people were forced to work on various government projects; young men in particular were often forced to move far from their home regions, and mortality rates were high. After Japan’s defeat in 1945, the returning colonial powers had to deal with nationalist movements which were in some places inspired by communist ideology. The Americans honoured previous pledges to grant the Philippines full independence in 1946, and Burma was granted independence shortly after the rest of British India in early 1948. After the Americans exerted pressure, the Indonesian declaration of independence, signed by Sukarno and Hatta on 17 August 1945, was finally recognized by the Dutch in late 1949. In all three countries per capita GDP in 1950 was below 1938 levels (Table 3.1)
In Burma and Indonesia, per capita GDP recovered only slowly in the two decades from 1950 to 1970; in Burma it was still lower in 1970 than in 1938, while in Indonesia it was only slightly higher. Paauw (1960: 209) argued that in Indonesia there had been structural retrogression after 1950, in the sense that the share of the labour-intensive sectors, including smallholder agriculture, and small-scale manufacturing and services in total output had increased. In other parts of the region, these two decades saw some growth. Particularly striking was the accelerated growth in Thailand, where after decades of economic stagnation, per capita GDP more than doubled between 1950 and 1970. After slow growth in per capita terms through the 1950s, growth also accelerated in the 1960s in both Singapore and Malaysia. By 1970, marked inequalities in per capita GDP were already obvious across the region. There were also differences in economic structure. In both the Philippines and Thailand, the non-agricultural sectors of the economy grew quite quickly after 1950, and accounted for more than 70 per cent of total GDP by 1970. The share was also over 70 per cent in Malaysia. But although by the 1960s, the industrial and service sectors were expanding, with the exception of Singapore the pace of growth was slower than in Taiwan and South Korea, let alone Japan. It was only when foreign, and particularly Japanese investment in manufacturing in Southeast Asia accelerated after 1970 that the manufacturing sector not only grew more rapidly but also began to account for a growing share of exports.